Protests 'hurt' Turkish economy

Protest rallies in Taksim Square in Turkey have lasted for 18 days, but this period was just enough to make a negative impact on the economy of this country. It is known that only five days of protests in different cities of Turkey have resulted in damage to the sum of $40 million, the bulk of which falls to Istanbul.

Turkey is a country with no oil and gas reserves or other natural resources. Turkey has gained its 16th place in the world and the sixth in Europe in terms of economic development thanks to the geo-strategic location and regional policy. Turkey has turned into a leading country of not only regional but also international level through diversifying the economy, making it more innovative and providing freedom to the private sector, thus ensuring competitiveness.

However, the Turkish economy has vulnerable sides, affecting which may profoundly weaken the country's economic development. The main problem of Turkey is balance of payments deficit, the adjustment of which under conditions of financial stress is fraught with significant loss of production, weakening of the lira and possibly fall in foreign exchange reserves. In 2012, the current account deficit in Turkey amounted to $48.8 billion, the trade deficit - $84 billion, the inflation rate was at 8.9 percent and the unemployment rate - at 10 percent.

In addition, Turkey is heavily dependent on foreign investment, and employment and incomes of most of the population comes from the development of tourism. Decline in the tourism sector could trigger a fall in GDP, lower foreign exchange earnings and lead to budgetary constraints.

According to the Ministry of Culture and Tourism of Turkey, in average, Turkey has more than 30 million tourists per year, who bring $30 billion worth of revenue to the economy. About 30 percent of the number of tourists alone account for the share of Istanbul, where the well-known events have recently taken place.

Protests in Istanbul, even of local character (in Taksim Square), have scared away the tourists from favorite vacation spot, resulting in Istanbul hotels being emptied by 80 percent. The calls made by some countries to their citizens not to travel to Turkey will harm the entire sector of tourism, the evaluation of which will be calculated at the end of the tourist season and reflected in the country's balance of payments.

The banking sector in Turkey, in turn, faced the problem of withdrawal of deposits. According to the Central Bank of Turkey, nearly $8 million has been withdrawn from the Turkish banks since early May to the present time. According to the head of the Central Bank of Turkey, Erdem Bashchi, mostly depositors, withdrawing their savings from banks in Turkey, are citizens of other countries. And it's a natural reaction of non-residents to the ongoing processes in Turkey.

Typically, political instability creates uncertainty, which seriously reduces the ability to plan and undermines confidence of consumers and investors in the future. The latter review their plans on investing their resources to where they are most in need, for example, in such basic means of production as transport and energy infrastructure.

Turkey has managed to avoid such situation. At the time, there is no threat of termination of any major investment project in Turkey. One of the important achievements in Turkey's energy sector is planning of the Akkuyu first nuclear power plant jointly with foreign partners, which will produce electricity by 2019. Along with these projects, the country is also developing projects for the construction of the second and third nuclear power plants.

However, the protests in Turkey slowed down the country's real estate market activity, which recently saw an increase in connection with the resolution for the acquisition of real estate in the country by foreigners. Second to Antalya on the number of transactions on real estate by foreigners was Istanbul.

Entrepreneurs working in Istanbul, have already appealed to the insurance companies for compensation for harm caused to their companies during the protests. Insurers Association of Turkey is in the process of damage assessment and calculation of the amount that will be paid to local entrepreneurs.

Cyclical ups and downs were all this time observes in the stock market of Turkey, as well as the relative increase in interest rates. Periodic growth of stock prices is associated by experts with the fact that the riots in Istanbul's Taksim Square are perceived by the businesses "as random".

However, even small economic losses, which today can be considered negligible, will grow with time, given the lost revenue that could be earned in the same period with a stable political situation.


Ellada Khankishiyeva   /Trend/